Budget support to developing countries European Parliament resolution of 5 July 2011 on the future of EU budget support to developing countries (2010/2300(INI))
Date: 2011-07-05
Institutions: Committee on Budgetary Control, Committee on Budgets, Committee on Development, Committee on Foreign Affairs, European Parliament
Subjects: EU aid, EU financing, corruption, developing countries, development aid, human rights, poverty, social economy, sustainable development








CE2013033EN.01003801.xml










5.2.2013   


EN


Official Journal of the European Union


CE 33/38





Tuesday 5 July 2011Budget support to developing countries
P7_TA(2011)0317
European Parliament resolution of 5 July 2011 on the future of EU budget support to developing countries (2010/2300(INI))
2013/C 33 E/05

The European Parliament,







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having regard to the commitments on aid volume, aid to sub-Saharan Africa and aid quality made by the G8 at the 2005 Gleneagles Summit and all subsequent G8 and G20 meetings,










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having regard to the Millennium Declaration adopted by the United Nations on 8 September 2000,










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having regard to the European Consensus on Development (1) and the European Union Code of Conduct on Complementarity and Division of Labour in Development Policies (2),










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having regard to the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action,










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having regard to Article 208 of the Treaty on the Functioning of the European Union, which stipulates that ‘the Union shall take account of the objectives of development cooperation in the policies that it implements which are likely to affect developing countries’,










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having regard to Article 25(1)(b) of Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation (3) (the ‘Development Cooperation Instrument’ (DCI)),










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having regard to Article 61(2) of the Cotonou Agreement,










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having regard to its resolution of 6 April 2006 on aid effectiveness and corruption in developing countries (4),










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having regard to its resolution of 5 May 2010 with observations forming an integral part of the decision on discharge in respect of the implementation of the budget of the Seventh, Eighth, Ninth and Tenth European Development Funds for the financial year 2008 (5),










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having regard to its position of 3 February 2011 on the Council position at first reading with a view to the adoption of a regulation of the European Parliament and of the Council amending Regulation (EC) No 1905/2006 establishing a financing instrument for development cooperation (6),










—


having regard to Court of Auditors Special Report No 11/2010 entitled ‘The Commission’s management of general budget support in ACP, Latin American and Asian countries’,










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having regard to the Green Paper from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the future of budget support to third countries (COM(2010)0586),










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having regard to the Commission’s 2007 document entitled ‘Guidelines on the Programming, Design & Management of General Budget Support’,










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having regard to the Commission’s 2008 report entitled ‘Budget support: The effective way to finance development?’










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having regard to the report of the ACP-EU Joint Parliamentary Assembly’s Committee on Economic Development, Finance and Trade on budgetary support as a means of delivering official development assistance (ODA) in ACP countries,










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having regard to Rule 48 of its Rules of Procedure,










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having regard to the report of the Committee on Development and the opinions of the Committee on Foreign Affairs, the Committee on Budgets and the Committee on Budgetary Control (A7-0206/2011),










A.


whereas the reduction and ultimate eradication of poverty is the European Union development policy’s primary objective under the Lisbon Treaty,










B.


whereas budget support has become one of the key forms of aid,










C.


whereas many donors consider general and sectoral budget support as a means of fostering partner countries’ ownership of development policies and lasting reform processes, strengthening national accountability institutions and systems, and facilitating growth, poverty reduction and the achievement of development objectives,










D.


whereas operational capacity development is needed in order to create in the first place the preconditions for programme-based approaches, including budget support or more far-reaching models,










E.


whereas budget support helps to overcome certain weaknesses of the traditional project-based approach (high transaction costs, fragmented parallel systems) and thus increase the coherence and efficiency of EU measures, aims which are stressed in the Lisbon Treaty,










F.


whereas budget support should help to improve the quality and effectiveness of aid, with particular reference to the principles of ownership and harmonisation, given that political dialogue between donors and recipients makes it possible to tailor contributions to the priorities countries have set in their national poverty reduction strategies,










G.


whereas, despite the risks mentioned by the European Court of Auditors in its reports on budget support, the ‘dynamic approach’ in the general conditionality of budget support is still a very important instrument of political dialogue; whereas budget support must nevertheless under no circumstances be considered as a ‘blank cheque’,










H.


whereas the range of commitments made by beneficiary countries to all their partners may, in some cases, make their use difficult, given that the conditions imposed by donors are sometimes contradictory,










I.


whereas the European Union has hitherto referred more frequently to violations of human rights (‘first-generation rights’) in partnership agreements rather than violations of social, economic and cultural rights (‘second-generation rights’),










J.


whereas all the donors should consult one another in order to prevent inconsistencies in conditionality,










K.


whereas, pursuant to Article 2(3) of the Lisbon Treaty, it is an objective of the European Union to work for a sustainable social market economy, and whereas this should also apply with reference to development policy and relations under the neighbourhood policy,










L.


whereas making a partner government publicly accountable for its budgetary management is an essential factor in the country’s capacity building process through the exercise of scrutiny by its parliament and the provision of information to civil society in the field of public finance,










1.


Welcomes the Commission’s initiative through the Green Paper on budget support, which is aimed principally at promoting the development of partner countries from within, and calls for the budget support eligibility criteria to be clarified with a view to avoiding any loss of control over or misuse of this type of assistance, with due account being taken of factors such as the corruption index ratings for the countries concerned;










2.


Welcomes the European-level consultation process; hopes that budget support award practice will be objectively analysed and improved in order to increase its effectiveness;










3.


Recalls that, according to the Lisbon Treaty, poverty reduction and eradication is the EU’s primary development policy objective; emphasises that poverty has multiple dimensions such as human, economic, socio-cultural, gender, environmental and political, which all need to be tackled by the EU development policy;










4.


Is of the opinion that EU aid should generate real quality change in the partner countries and recognises budget support as an effective tool for achieving this goal, provided that, as well as implying conditionality, it is used alongside effective political and policy dialogue;










5.


Emphasises the crucial and compulsory role of policy coherence in the implementation of a high-impact development policy; further calls for the EU foreign and security policy to focus on the promotion of democracy and human rights, peace and security, all key preconditions for sustainable development; calls for more systematic efforts to mainstream climate change adaptation and disaster risk reduction measures;










6.


Takes the view that taxation guarantees an independent source of financing for sustainable development and provides an important link between the governments and citizens of developing countries; calls for the development of a viable fiscal administration and a comprehensive tax infrastructure to be made one of the highest priorities of budget support; recommends that budget support policy should incorporate measures to combat tax havens, tax evasion and illicit capital flight;










7.


Stresses the need to use sectoral budget support wherever appropriate in order to ensure better targeting of basic social sectors, particularly health, education and assistance for the most vulnerable groups, especially persons with disabilities;










8.


Points out that budget support must not be used to reinforce the EU’s particular economic and strategic interests, but to reach development objectives of and for developing countries, especially to eradicate poverty and hunger;










9.


Draws attention to the innovative role played by the EU in the field of budget support and the added value which the Commission brings, owing to its expertise in this area;










10.


Notes that budget support can enhance not only the accountability of governments but also donor coordination through the necessary dialogue on budgetary issues; points out that this a possible way forward for better coordination with emerging donors;










11.


Stresses that the Union has a responsibility to pass on its experience to other institutional stakeholders, in particular at the High-Level Forum on Aid Effectiveness in Busan;










12.


Stresses that the dynamic approach adopted by the Commission and a majority of budget support providers entails a number of risks which must be duly taken into account; calls on the Commission to carry out national assessments of the likely risks and benefits of budget support in partner countries;










13.


Calls on the EU to administer budget support in such a way as to take full advantage of its complementarity with other forms of aid;










14.


Stresses the need to strengthen both the Commission’s monitoring mechanisms and parliamentary scrutiny and the provision of information to civil society in countries in receipt of budget support; stresses also that optimum procedures must be established for auditing the public finances of recipient countries as a precondition for any disbursement of funds;










15.


Recalls that clearly defined, widely supported and closely monitored indicators are essential in order to demonstrate the concrete effects of budget support in third countries and that the relevant budgetary authorities should be updated regularly on the indicators and guidelines that shape the decision-making process in relation to budget support; emphasises that these indicators must be better tailored to the specific needs of partner countries in order to avoid the ‘one size fits all’ approach taken by the Commission, which is potentially counterproductive;










16.


Calls for budget support to be made contingent on democratic parliamentary scrutiny of the budget in recipient countries; calls for the broad participation of parliaments and consultation of civil society in partner countries, so as to ensure that decisions about the use of budget support funds can be taken democratically;










17.


Calls on the Commission to ensure, before budget support is granted, that the aims of the intervention are part of the national programmes of the recipient country and that the principles of coordination, complementarity and coherence in relation to other donors are respected, as well as additionality to the resources allocated by the recipient country;










18.


With a view to ensuring the relevance of EU budget support, calls on the Commission to streamline its programming and design process by improving the preparation and documentation of decisions to launch budget support operations and, given resource constraints in Delegations, which often limit their capacity to perform certain activities, calls on the Commission to provide sufficient qualified staff for the implementation process, as budget support requires different analytical skills from project and programme financing;










19.


Insists on the leading role that national parliaments of recipient countries, civil society organisations and local authorities should play as they are best placed to identify priority sectors, prepare Country Strategy Papers and monitor budget allocations; demands that national parliaments adopt Country Strategy Papers and the multiannual budget in consultation with civil society, prior to policy dialogue with donors on budget support, in order to empower parliamentary scrutiny;










20.


Emphasises the importance of the effectiveness of EU development aid; calls on developing EU-level independent evaluation systems and a complaints mechanism open to those affected by EU aid, as well as supporting in-country accountability mechanisms;










21.


Calls on the Commission to supply a comprehensive financial analysis of general and sectoral budget support granted to local government and to consider whether part of budget support should be decentralised with a view to ensuring genuine ownership by local government stakeholders, as well as to assess the risks involved in doing so;










22.


Calls on the EU to respect and promote genuine ownership of developing countries over their development strategy and to refrain from crowding out national policy-makers through policy dialogue surrounding budget support, which undermines democratic accountability and contributes to depoliticising domestic political realities;










23.


Considers that budget support should focus as a priority on the government departments that have the greatest impact on poverty reduction, in particular health and education ministries;










24.


Considers, furthermore, that there is a need for gender mainstreaming in budget support, with attention being paid to gender issues at all stages in the budget process, dialogue being promoted with women’s associations and gender-differentiated indicators being introduced;










25.


Stresses that, with a view to enhancing mutual accountability, the Commission should step up its role as a facilitator between government, members of parliament and civil society, and considers, to that end, that a percentage of the budget support earmarked for technical assistance to sectoral ministries could also be used for capacity building in parliaments and civil society in order to enable them to play their budget support oversight role to the full;










26.


Stresses the prominent role of donor organisations in supporting partner countries in their capacity development and the positive influence of local project aid on reducing poverty and promoting inclusive growth and sustainable development in partner countries;










27.


Is concerned at the effects of macro-economic destabilisation and the impact on the most vulnerable sections of the population which a sudden break in budget support might cause; proposes that, on the basis of concerted action by donors and following consultation of the civil society and parliament of the partner country concerned, a mechanism be set up for the gradual reduction of budget support payments, which could attenuate such impacts, encourage political dialogue and enable concerted solutions to be found to the difficulties encountered;










28.


Believes that budget support just like programmed aid should be treated as a transitional instrument and should not hamper efforts to strengthen countries’ capacities to raise own resources, such as taxes, in order to become independent from third country donations;










29.


Calls on donor countries to coordinate budget support more effectively and make such support more predictable, and points out that they need to be willing to enter into long-term commitments with partner countries;










30.


Calls on the EU to take the appropriate measures, so that there is commitment from the third countries that they will be investing in a mechanism which promotes their financial stability;










31.


Insists on the effective implementation of the requirement contained in Article 25(b) of Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation (the DCI Regulation), which stipulates that the Commission shall consistently use an approach based on results and performance indicators and shall clearly define and monitor its conditionality and support efforts of partner countries to develop parliamentary control and audit capacities and to increase transparency and public access to information’; urges the Commission to extend these provisions to budget support to beneficiary countries of the European Development Fund(the ACP countries), for which – so far – only the more technical criteria of Article 61(2) of the Cotonou Agreement apply;










32.


Considers that, since the use of budget support is an important strategic decision in the Union’s relation with its partner countries, Article 290 TFEU (delegated acts) must apply to the definition of the eligibility criteria for this aid modality, giving the Council and Parliament, as co-legislators, full codecision powers over its adoption, including – if necessary – the right of revocation of the delegated act;










33.


Recalls that major deficiencies in capabilities, in particular weak governance, are liable to deprive many developing countries of budget support;










34.


Takes the view that financing decisions on budget support must be driven not only by expected benefits but also by the short-term and long-term risks incurred in both donor and partner countries; notes that the Court of Auditors, in its Special Report (7), is in full agreement with this assessment by highlighting that a sound risk management framework is still to be developed and implemented;










35.


Is concerned that the Court of Auditors (‘the Court’) in its Annual Report on the activities funded by the Eighth, Ninth and Tenth European Development Funds (EDFs) for the financial year 2009 found budget support payments to be affected by a high frequency of non-quantifiable errors due to the lack of formalised and structured demonstration of compliance with payment conditions; at the same time takes note of and welcomes a substantial improvement in the demonstration of eligibility noted by the Court under the Tenth EDF owing to the clearer assessment frameworks that are now routinely used;










36.


Points out that public investments in public goods, such as education, social security, infrastructures and productive capacities, especially with regard to smallholder farming and support to local markets, are crucial for successful development strategies;










37.


Calls on the Commission to ensure that the specific conditions for performance-based variable tranches clearly specify the indicators, targets, calculation methods and verification sources and that Delegations’ reports provide a structured and formalised demonstration of public finance management progress by clearly setting the criteria against which progress is to be assessed, the progress made and the reasons why the reform programme may have not been implemented according to plan;










38.


Calls on the Commission to take all necessary measures in order to combat corruption in the recipient countries, including suspension of disbursements if necessary; in this context calls on the Commission to maintain a close and regular dialogue with partner governments on corruption issues and pay sufficient attention to the capacity-building needs of particular recipient countries in terms of accountability and anti-corruption mechanisms;










39.


Considers the predictability of aid flows to be one of the most important factors for ensuring the quality of spending, as it enables the partner countries to undertake long-term expenditure planning and to sustain improvements in sectoral policies; advocates that such an approach be reinforced by partner countries’ fiscal policies and mobilisation of domestic revenue which, in the long term, should reduce aid dependency;










40.


Recalls that the lack of progress as regards the management of public finances still disqualifies many countries from receiving budget support;










41.


Takes the view that budget support should be introduced gradually in developing countries, starting with a limited amount and increasing it as the partner countries build capacity;










42.


Reiterates that budget support should be spent in pursuit of poverty reduction, including the pursuit of the Millennium Development Goals and to principles such as partnership, aid effectiveness and policy coherence for development; expresses its support for results-based incentives but emphasises that variances of disbursement must be predictable as far as possible so as not to impact negatively on budgetary planning; reiterates that budget support should only be granted to countries meeting and upholding minimum standards of governance and respect for human rights; underlines that conditions linked to macro-economic reforms must be compatible with human and social development;










43.


Encourages developing countries and the Commission to promote participatory development, in accordance with the relevant provisions of the Cotonou Agreement and of Articles 19 and 20 of Regulation (EC) No 1905/2006, in particular with regard to the promotion and consultation of civil society and local and regional authorities;










44.


Points out that, when granting budget support to banana-supplying ACP countries benefiting from accompanying measures in this sector, it is important to include in the variable tranche based on governance indicators the specific conditions contained in the new Article 17a that Parliament is proposing be inserted in Regulation (EC) No 1905/2006 (DCI Regulation), as set out in an amendment in its above mentioned position of 3 February 2011;










45.


Demands that the Commission publish the agreements with developing countries on budget support and MDG contracts;










46.


Underlines that sectoral budget support can constitute under certain circumstances a useful intermediary option to give the concerned governments and parliaments more ownership over aid funds while earmarking them for the MDGs;










47.


Considers that oil and mineral rich countries have the potential to finance their own development and fight against poverty through transparent tax collection systems and fair redistribution of wealth;










48.


Takes the view that, in principle, MDG contracts are an example of high-quality, results-oriented budget support (long-term, predictable, targeted at social sectors, etc.); calls accordingly on the Commission to publish an assessment of MDG contracts in 2011 and to look into the feasibility of extending them to a larger number of countries;










49.


Calls on the Commission also to publish the conditionalities and performance indicators in Country Strategy Papers on the occasion of the mid-term review; takes the view that budget support performance should be measured in terms of progress towards poverty reduction targets and the MDGs;










50.


Reiterates its previous calls on the Commission to move from control over inputs to the checking of results against indicators, by improving its reporting system so that it concentrates on the effectiveness of the programmes;










51.


States that the effectiveness of development-policy measures in the partner countries must fully take into consideration local conditions and respect the EU values as stated by the Treaty including the principle of rule of law and democracy; stresses that needs must remain a crucial criterion for the allocation of EU development aid;










52.


Calls on the Commission and the Member States to create a public register in which budget support agreements, procedures and development indicators are transparently listed, with a view to reinforcing the domestic democratic institutions and to ensuring mutual accountability;










53.


Calls on the Member States to show greater consistency at national and Community level as regards development aid policy; calls on the Member States to make use of the European External Action Service to strengthen their coordination with the Commission as regards budget support so as to avoid duplication and inconsistency;










54.


Reminds the Commission and the Member States to harmonise their development cooperation and to improve mutual accountability;










55.


Is firmly convinced that a thorough analysis of the future of EU budget support to third countries must address the issue of budgetisation of the European Development Fund; is aware of the historical and institutional background to the current situation but believes that the time has come for the Council, the Member States and the ACP countries to acknowledge that this situation is detrimental to the efficiency, transparency and accountability of EU budget support; emphasises, however, that budgetisation must not entail a decrease in the overall financial envelope for development policies;










56.


Calls on the Member States, the Commission and the European External Action Service (EEAS), in line with the practice established in other policy fields, to improve the coordination of their respective budget support to third countries in order to avoid overlap, inconsistencies and incoherencies; deplores the reviews showing that, at sectoral level, weak policies, institutions and service delivery systems have prompted donors to use their own systems to implement projects, and to act bilaterally rather than in a coordinated manner, a situation which is all the more unacceptable in a context of scarce funding and which also makes it very hard for the EU to live up to its promises on making aid more predictable; maintains that a focus on specific areas offering the greatest added value should drive EU budget support throughout all phases of preparation and delivery;










57.


Calls on the Commission to raise public awareness of the risks entailed by the practice of budget support and to highlight the positive impact of budget support on partner emancipation;










58.


Calls on the EU and its Member States to continue to promote and preserve their financial support and at the same time to provide consultative support for technocratic management of public finances;










59.


Emphasises that the aims of improved coordination are to optimise the allocation of resources, enhance the exchange of best practices and boost the efficiency of budget support;










60.


Considers that the Union should recognise and utilise the added value generated by its huge political weight and the potentially broad scope of its action, ensuring political influence proportional to the financial support given;










61.


Instructs its President to forward this resolution to the Council and the Commission.






(1)  OJ C 46, 24.2.2006, p. 1.

(2)  Council Conclusions of 15 May 2007 (09558/2007).

(3)  OJ L 378, 27.12.2006, p. 41.

(4)  OJ C 293 E, 2.12.2006, p. 316.

(5)  OJ L 252, 25.9.2010, p. 109.

(6)  Texts adopted, P7_TA(2011)0030.

(7)  European Court of Auditors Special Report No 11/2010: ‘The Commission’s management of general budget support in ACP, Latin American and Asian countries’.